Scale Your Subscription Sales In 2024 | #259 Andriy Rudnyk

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Claus Lauter: Hello and welcome to another episode of the e commerce coffee break podcast. Today we want to talk about subscription and what subscription can mean for your business specifically looking into 2024. With me on the show today as a guest, I have Andriy Rudnyk. He is the founder of goodsubscription.agency and after his introduction to e commerce at BoldCommerce in 2018, Andrew started his own Shopify agency, goodsubscription.agency. They're focusing on helping brands Grow their recurring revenues since they have to help brands like C2Table, RISI Home and Dwell differently, migrate Shopify apps, improve conversions, grow their CLV and reduce subscription churn.

His team has also since launched their own complimentary subscription app, good subscription upsell out of the Shopify store app. So we want to talk about this a little bit as well. So let's welcome Andriy to the show. Hi, how are you?, I'm very good Klaus. Thanks for such a nice intro. Let's start from scratch.

Why should I bother about subscriptions at all in my business? Give me an idea. Yeah. 

Andriy Rudnyk: The big reason for focusing on recurring revenue whenever we say recurring revenue, people just get this weird hypothetical idea of like, Oh, this is. cool, but really what we're talking about is focusing on repeat customers.

And if you think about just basic business and business basics, your repeat customers are your most profitable, most loyal customers. So the reason why you want to focus on recurring revenue or launch some kind of a recurring revenue or subscription program is for two main reasons. First of all The repeat customers have higher lifetime value, which means they're more profitable.

A subscription customer in general, whenever we look at the brands we work with being, Shopify plus brands or non Shopify plus brands, very common thing you see is subscribers are worth on average two or three times more than non subscribers. So that gives you an idea of this and profit obviously is the growth engine of your business.

 That's number one reason. The second reason is if you have higher lifetime values for customers, you can bid more on ads and you can be more aggressive on customer acquisition. So now customer acquisition costs are have been steadily going up since basically since the beginning of a pandemic since I was 14.

Or is it for 1312? I can't remember. Apple changes. so having subscription customers allows you to be more aggressive there and fundamentally be more profitable. Grom, they allow you to, so to put it more succinctly. Subscription customers allow you to grow faster and more profitably, period. 

Claus Lauter: No, it makes perfect sense. Now, as a business owner who potentially has no subscription model in their e commerce business right now, how do I find out if subscription actually fits my brand or my product? What kind of... Variations or options do I have as a business owner? 

Andriy Rudnyk: Yeah, i'm not going to be one of those people that says subscriptions are a great fit for every business It's like if you're a coffin seller, that's not probably not a great example for you.

But if Generally speaking if you have a consumable product or if you see Recur benefits in recurring use of your product. Those are pretty good. No brainers. One. If you wanted to harder stats, if you look at your returning customer rate over 90 days, Shopify does that pretty easily in your shop by analytics.

And if it's anywhere above 30 40 percent you know that you have a pretty good product that is purchased on recurring basis already. And the fun fact is, for example, if you don't have a subscription program and you look at the customer cohorts, And the people that buy products repeatedly, they probably, even if you don't have a subscription, program yet, some people have been buying your product for years and they've been spending thousands of dollars with your brand, where on the other hand, some people have bought your product once and they never came back again.

 The goal here is to understand who these repeat purchasers are. Why are they buying? Why did they buy in the first place? And why do they keep buying over and over and over? That is really the key is understanding that ideal subscriber persona. And we can talk about that, in a little bit, cause we do a ton of research surveys and phone call follow ups and, building a kind of psychographic persona and really adjusting the whole business.

To work with that, 

Claus Lauter: but I think what you're saying is before you start a subscription model or at a subscription app, and there are a few of them out there to your Shopify store, do your homework and really find out where is the focus in your business or who is the right audience. Yeah. Within your business.

Is that right? Yeah. Now the biggest, problem that I hear here from versions that have started it and have invested it in that stock, is that the churn rate is very high. And I think that's the biggest risk. Tell me a little bit about churn rates. Yeah. 

Andriy Rudnyk: Two big ways to think about subscriptions.

Once you launch is you have two real ends of this funnel. You have. customer acquisition, customer retention. To talk about churn specifically, in my mind, good retention is really what we're aiming for. What we're really aiming for is trying to help people to place not just one order, but two, three, four, five, ten, over their lifetime.

 The basics of good of good retention strategy, in my mind, it's like, you have to, first of all, start to think of it as a relationship. So whenever somebody buys, signs up for a subscription, they're agreeing to, they're allowing you to charge their credit card at will. As long as obviously you give them a heads up and as long as they keep liking the product.

 In a relationship like that, it has to be like, set up as a long term relationship from the get go. So to me, it really, there's three pillars of that. And that is transparency, flexibility. And occasional pampering. So like any good long term relationship., fundamentally, what does that really come down to?

 It comes down to transparency in when they're going to get charged, what they're going to get. So upcoming orders, is really important access. Easy access to the customer portal is really important. Doing post purchase surveys of how did you find this experience is anything can do really important.

So asking for feedback, that's actually one of the biggest differences between, brands who are Growing in subscriptions and have been tapered off or are losing subscribers is they're constantly looking for customer feedback. One great brand that does this really well is John Roman over at BattleBox.

 The way they do so BattleBox is a monthly survival gear box. So if you think about it, they send you a box of survival tools of knives and matches and waterproof, gloves and all that kind of stuff every single month. And you think churn must be crazy. The good thing for John and what they do is they're extremely hungry for customer feedback.

So they have customer groups. They have community where the Facebook community where people, die higher audience. Members are there and they're providing feedback on every month's box and they do a Facebook live event every month asking for feed for live feedback. so that's really like a really gutsy of them.

 But it really shows that they have a really close to the ground. When it comes to. taking feedback and making sure that, hey, if you didn't like this month's box, if you didn't like your first box or second box or third box or 10th box, here's what we're doing about that. And also hyping up the next box too and things of that nature.

 In my mind, so yeah, churn really comes down to those three things. The unfortunate thing, but when you look at some stats is that the number one reason for most brands for churn is I have too much stuff. So when I have to, and this comes back to our to my 3 points and 2nd point of flexibility.

When you have too much stuff, that's not a reason to cancel a subscription. That's a reason to reschedule an order. To pause a subscription, to delay, to snooze, and your job as a brand is to, through your subscriber onboarding, through emails, unboxing experience, to train them on every reason that's better than cancel.

 aNd that's fundamentally like bypassing the number one churn cause for most people. There's also really good tools to give you even more insights into why people are churning. , so I would pay, so fundamentally pay attention to cancellation reasons and be proactive about them.

Because, churn has this really weird mental space where we think about churn as a really abstract number. Same kind of as MRR or recurring revenue. But if you think about churn as... Money basically, instead of thinking about churn, you think about customer lifetime value. How do we get a person to complete their third order or their fourth order instead of how do we get them to stop?

How do we prevent them from canceling? So you have to still think about every single purchase they make as a purchase. You have to either convince them of or remind them why they signed up in the first place.

Claus Lauter: Now, I like the approach, to build a community around your subscription. I have seen this with, I'm not sure if that's the guy that I saw, but they're doing it quite well with, curated boxes where the basically every month you get a box with different things that might work for some businesses, not for others.

But I think to build a kind of membership community idea around it and keep people in the loop definitely will help to lower your churn rate. When you are building up your subscription, what kind of steps as a merchant do I need to go through to really get it settled in and get started?

Because it's a bit of a process. You're not starting from today and then tomorrow I have a nicely working subscription program. How does that work? Yeah, 

Andriy Rudnyk: The basic steps is you have to have a good consumable product. Let's say you have that in spades, let's say you have coffee or supplements or something like that, or you're building a membership, that is a monthly membership and it's access either to digital content.

 We've done setups for publication magazines, before too, where it's like, Hey, here's weekly content that you get and you just pay. 5, 10 a month. So there's another aspect to that. But let's say you have the content, you have the product. The next step is if you're starting from scratch is you need a good subscription app.

 And that's not a plug just for our app. That's a plug for all of the great subscription apps out there. there's about 30 different ways, 30 different apps on the store right now. Last time I checked. And it's a really hazy way , or There's a lot of different options. Now we're really seeing, apps really competing seriously on, really great, acquisition features and retention features.

 And there's been a ton of new apps, but also, new apps, for example, on the app store, like loop or skio or smarter or stay, atomic, all of these have been a really good, up and coming apps that have really put the fire, to the heels of the incumbent, which is recharge, as well as bold, subscriptions.

Recharge has really been stepping up. Over the last, I'd say, 12 months with the feature parity and trying to keep up with a lot of these small, hungry startups that are, just fighting research and a lot of, but all of those are really good, options, honestly, I would suggest like with any purchase of any sort of software tool, do your research.

Don't go with the first one. Don't go with the first salesperson you talk to install, at least install three and see what's actually going to be a good fit for your brand and for your subscription program. Look at their, the flexibility of their subscribe and save or their prepaid options.

Can you promote and sell, can you acquire in the way you need to acquire your customers? If you're a supplement brand. Do they have a robust subscribe and save program with flexible discounts? And maybe you want to discount on the third order and maybe discount even more on the 10th order.

 For example, if you're a membership, do they have good prepayment options where you can just upsell somebody to prepay for a year really easily? , on the retention side, do they have good churn analytics? Do they have good credit card dunning churn? Turn prevention funnels and turn promotions so that are personalized.

Now, this is a really cool, thing that I've seen more and more of through from apps I'll shout out loop subscriptions on having personalized cancellation offers. For example, upcoming order offers and cancellation offers. So if you're canceling on order for. You have the order five coming up you will have different cancellation promotions.

Like, Hey, you've been with us for four orders. And you're subscribed to this product. Actually, I get this product with this free bonus product. If you just stick around for another month. And you can do that. Like now you have a lot of like really cool personalization logic built into these apps out of the box, which is really, really neat.

Claus Lauter: And I think that exactly is the problem because as a normal merchant, you have a million things on your plate and it seems subscription to set it up the right way is not that easy. So I reckon with good subscription agency with your company, you're helping merchants with that. Tell me a little bit more about 

Andriy Rudnyk: that.

It's part of the services we provide. We do Shopify design. We do Shopify subscription app matchmaking setup. We help with setting up email flows and onboarding. For new subscriber joins. And then here's a sequence of four to six emails to train them on your mission. How to make the most affordable product, how to use the subscription portal well how to get ahold of FAQ support, upsell them on the next upcoming order, remind them of the upcoming order.

 So we do all of those services. People can check us out. Good subscription agency, basically, that's what we do is special specialize exclusively on working with subscription brands. We've been doing that since 2020. we're specialists. You pay a premium, but we give you a reliable results.

 That's my plug., thanks for getting me to letting me squeeze that in. 

Claus Lauter: No, definitely being on asking on that, who's your perfect customer to what kind of niches, verticals industries do you work most with? 

Andriy Rudnyk: We work with any brand on Shopify that wants to sell or already selling subscriptions.

Our ideal customer is generally somebody who's probably, who's probably a little more established. I'd say they've probably set up subscriptions already, although we will help with some like starter stores and with some basic setup, we have pretty acceptable, like approachable pricing. The most impact I'd say, is Brands that are, let's say already selling subscriptions, maybe they have a couple of thousand subscribers.

We come into and they've hit a plateau. There's like, okay, we're not really acquiring anybody. We're losing as many as we're cost of subscribers a month as we're getting, we've gotten here with whatever tools we've got, or it's like, you know what, it's time to rethink our subscription app, or it's time to really ramp up our conversion funnel.

And that's really where we come in. I think that's a 

Claus Lauter: very common thing that people pump money into marketing to get people into subscriptions and the churn rate is so high that they basically lose them. And it's a, they're not really winning. I was like yours helps there, but you also have a Shopify app I've seen.

What's that about? 

Andriy Rudnyk: Yeah, so we released like we've been working on subscription pages with store owners for years and really trying to optimize the subscribe and save offer. So what our app allows, it's compatible with every other subscription app that you have. And what it allows you is to upsell and promote subscribe and save program over a one time option really well.

 So it's like my goal is to make. To give store owners that have basically no money, no coding skills or no design skills easy way to upsell their subscribe and save program on the product pages. and really making it really easy to make it a no brainer to try subscriptions, on their store.

 And that's a good subscription upsell app on the app store. And that was fundamentally because of Sometimes store owners like starter small, smaller store owners reach out to us and they're, like they just don't have the budget to really overhaul their subscription signup design.

 We needed an easy way for them to just for 20 a month, install an app and, and have all these features, just built in and they can just. On board themselves and set it all up themselves. And it's really straightforward. And we have seen, results where people install our app and their subscription opt ins quadruple overnight.

 And it's with simple, I'm not going to say simple tricks, but, basically, at this point, hundreds of thousands of dollars went into kind of designing this subscribe and save widget that we've done and we split test it on many different brands. There's a couple of things where you have to, and the design that we figured out is you pre select the subscribe and save option as number one, you put the price of the product into the buttons.

So people have to consciously opt out. of or opt into the higher price with one time purchases, having simple pop ups and dynamic promos, that explain what you're missing if you're opting into subscribe into one time versus subscribe and save, pop ups that explain cancel any time as well as frequency flexibility, that kind of thing.

 That's where our app is focused on. But when we're hands on with brands, And we work as an agency one, basically our flow and how we help brands, how we help brands really grow their subscriptions is we start off with ideal subscriber persona definition and research.

, really trying to align the business to focus on this repeat customer cohort. I mentioned before, because you see this often, like you said, Cust or brands will spend a ton of money on, acquiring a new person. However, one person sticks around for one order and another person sticks around for 10 to 20 orders.

What gives? Who? Why? What's the difference? what we do is when we start with with brands is we do ideal subscriber persona research. So that includes a survey, phone call follow ups, as well as user session testing and survey. Like you can do this totally on your own.

You're like, you don't even have to hire us. Like the survey is to identify your most loyal repeat customers. And you can look at their number of orders that they've placed. the frequency that they that they place these orders, across how long they've been with the brand. So let's say you identify that out of your 2000 subscribers, 600 are really making 50 percent or 60 percent of your revenue over the course of a lifetime.

You're like, okay, so you set up, you send them a survey, and fundamentally what you're trying to find is three things, their conversion reason, their engagement reasons, and the retention reasons. And it's with simple questions like when signing up for a box, what are you ultimately trying to get done or accomplish?

And just letting them answer long. Form and customers, your diehard customers will tell you, Hey, I signed up because I wanted it fun. It was fun. It seemed like a fun unboxing. It seemed like really useful products. For example, if it's a monthly or quarterly box and it seemed like really good value.

Okay. You do the analysis, you figure out, those are the three reasons why the diehard customers are signing up. Then you ask them why do they keep staying subscribed? As well as what is the biggest reason, or do you remember the first moment you saw value in the subscription?

Or how you've incorporated the subscription into your daily life? So, for example, one, this is with a tech box that we're working with we did the survey, and we found that the ideal customers, actually, whenever this box of stuff comes, of all of these cool tech toys, whenever they don't use an item in the tech, that comes, they already have somebody in mind that they could re-gift it to.

So to them, the value of the box is a no-brainer. 'cause it's like, oh, it's not just a box for me. If I don't like any of the items, I can just pass 'em around and just use 'em as gift stocking stuffers and whatever. We found that, oh, that's really important. to keeping the customer lifetime value going.

So guess what? When it comes to onboarding and purchasing, so the purchasing funnel can be adjusted to make sure that those things are apparent. And then the onboarding emails, like in the first couple of emails, as well as in the unboxing and the inserts and the leaflets that you give them. It's easily easy to read gift if you don't like any of the items.

 And maybe you would even go out of the way and give them a little gift bag or something else, something along the lines of that is branded with BrioBox. And maybe there's a little insert, Hey, this comes from BrioBox and here's a referral code if you want to get your own box. So that's what really happens when you start to prioritize your returning Highest profit returning most loyal customers and you align your business to acquire more of those and retain more of those And then you see oh Sales are we'll keep rolling in our churns and decrease because we're no longer trying to just shotgun blast and get everybody we're trying to focus specifically on these audiences and because they're higher customer lifetime value, you can also bid a little higher on the ads and outcompete your competitors.

Claus Lauter: I love that story. And it shows that as a merchant, as a seller, you should not be afraid of contacting your customers and getting as much information as possible. So from time to time I talked to the two merchants and I was like, yeah, I don't really want to bother them. They're not answering my surveys and whatsoever.

And that's where I think the Brands who are really making big money having a big advantage that they reach out and really have a good customer understanding. And then you come up with things like you can re gift it if you don't need it. That makes you the buyer a hero because somebody else will be happy.

It's a great story there. Before we come to the end of the coffee break today, is there a final thoughts that you want to leave our 

Andriy Rudnyk: listeners with? Focus on repeat business and focus on good long term practice. And this is why I like, the subscription as a business model is because the incentive to be good and honest and transparent and provide good value to your customers is It like is so palpable, that it just incentivizes good business practices.

You can't get away with selling crappy products on subscription. You need to be open to feedback. You need to be transparent. That's the way you're going to grow your business. It helps you sleep at night. And it also builds a good business in the long term. 

Claus Lauter: It's probably not a good idea to build a subscription business for getting Chinese dropshipping products to your customers.

Andriy Rudnyk: Won't work. People are trying to start businesses in all sorts of ways. I get it. People want to try entrepreneurship. I hope that's a simple step that they get passed right away. It's really difficult to scale a dropshipping business. We don't work with any dropshippers really.

 Particularly for that reason. 

Claus Lauter: Yeah. Yeah. Makes perfect sense. And where can people find out more about you guys? 

Andriy Rudnyk: The best way, if people want to contact me directly. you can find me on LinkedIn, Andre Rudnick, and you could check out our agency and all of our agency work at Good subscription agency, which is Google Good Subscription Agency, LinkedIn and that.

 If you already have a subscription set up what you want a good way to upsell 'em, that's better than what comes out of the box with a lot of these subscription apps. Our good subscription upsell app, you can find that on the app store. 

Claus Lauter: Cool. I will put the links in the show notes and you just won't click away.

Yeah. Thanks so much for your time today. I think that was a really good overview. What subscription can do to your business. And I think if you have a good product, that's the way to go. Thanks so much for your time today. 

Andriy Rudnyk: Thanks for having me on classes.